The second day of the Official FIDIC Contract Users’ Conference (Africa and Middle East time zone event) on 12 May 2022 had a particular focus on working with FIDIC contracts on projects funded by international financial institutions and the importance of teamwork and collaboration across project teams, writes FIDIC communications advisor Andy Walker.
The event, sponsored by FIDIC strategic partner, international law firm CMS, and supported by silver sponsors HKA and Fenwick Elliott, targeted the Africa and Middle East contract users’ community and offered a unique opportunity to share progress on the application and use of FIDIC contracts internationally and across the region.
The chair for the second day of the conference was FIDIC board member Martina Hess, who introduced first speaker Thomas E. Ngulika, principal engineer at the Ministry of Works and Transport for the United Republic of Tanzania, to speak about his experiences of working with FIDIC contracts on projects funded by the international financial institutions (IFIs), in particular on the implementation of road projects in Tanzania.
Increased take-up of FIDIC contracts in Tanzania
Ngulika said that road transport in Tanzania was the dominant mode and accounts for over 80% of passenger traffic and over 95% of freight traffic in the country. “The major challenges that face our roads implementing agencies - Tanzania Roads Agency (TANROADS) and Tanzania Rural and Urban Roads Agency – are project cost and time overruns.,” he said. In-house capacity building programmes have been undertaken together with fuller engagement of international consultants to improve delivery and some steps forward had been made, he said.
Following mainly only using the FIDIC Red Book, road projects in Tanzania were now adopting other forms of FIDIC Contracts, under the positive recommendations of TANROADS and this has led to FIDIC being adopted by other government agencies like Tanzania Railways Corporation and Tanzania Electric Company on ongoing projects like the $7.6bn Standard Gauge Railway project (DB Contract), the £2.8bn Nyerere Hydropower project (EPC Contract) and the $750m Dar es Salaam Maritime Gateway Programme (DB Contract).
According to Ngulika, the reason why FIDIC contracts were being chosen for these projects were many and included the fact that the contracts were known to balance the risks, roles and responsibilities of the parties;, that they were suitable for all types of infrastructure projects, that FIDIC contracts allowed the use of particular conditions and provided guidance on their preparation and, crucially, because the contracts had reduced the risks to the government that would otherwise have resulted from shortcomings of the preparation of specifications, design and management of complex projects.
Joining a short panel discussion following Thomas Ngulika’s presentation were Aisha Nadar, an infrastructure procurement and dispute management consultant at Advokatfirman Runeland in Sweden, and also Sheena Bryson, a senior associate at Pinsent Masons in the UK. Both offered guidance on the key importance of engaging all players in the supply chain, up front, and asking the right questions at the right time. “Making successful projects is a team sport but that team playing needs to start right at the beginning,” said Aisha Nadar. Problems needed to be addressed up front because it was too late when you’re in arbitration, she said. Sheena Bryson agreed with Nadar, saying that it was crucial to address emerging issues early as this would also prevent issues cascading down through the supply chain.
Given Ngulika’s favourable experience of using FIDIC contracts, conference chair Martina Hess asked him what his advice would be to other clients and employers who might be considering using FIDIC. His response was clear and to the point. “FIDIC contracts are the documents to go with as they help to remove many of the risks that can arise on projects,” said Ngulika.
Role of the engineer under the FIDIC Forms
The second session of day two, chaired by Fenwick Elliott partner Nicholas Gould, delved deeper into the contractual aspects of the regional experiences of using FIDIC Forms. Dr Waleed El Nemr, contracts director at Hill International (North Africa), led off with a contribution on the role and authority of the engineer under FIDIC contracts. El Nemr outlined the key requirements of fairness, impartiality and neutrality but highlighted that conflict arises between role of the engineer in the consultancy agreement and in the construction contract in respect of neutrality and fairness.
He also asked if an employer is expected to prepare a claim and the engineer is to neutrally/fairly review it, then does the Consultancy Agreement account for such an employer role? If not, and the employer is not staffed to undertake this role, then the employer has options including hiring staff or a claims consultant. El Nemr pointed to the FIDIC Golden Principles, which he said clearly outlined the duties and responsibilities of the engineer according to FIDIC contracts.
The next speaker, Funmi Iyayi, director at the Lagos Chamber of Commerce International Arbitration Centre, looked at where contracts go wrong from an African perspective. Supply chain disruption was a big issue, she said, as due to the lack of suitable manufacturing industries in Africa, most construction materials and goods are sourced outside the continent. Highlighting the scale of the potential issues involved, Iyayi reported that in 2020, construction projects were worth $400bn, with over 12,000 companies in Africa importing materials from all over the world.
“Disruptions to the supply chain present significant challenges in Africa. These are often caused by unpredictable circumstances (e.g. Covid -19), but disruptions in the global supply chain can very quickly affect contracts as parties are unable to proceed without imported materials,” she said. Iyayi also highlighted the challenge of foreign exchange fluctuation risk exposures impacting contract profitability as the local currency rises steadily against the dollar. To mitigate this, contract parties must carefully allocate the risk to prevent the failure of the contract, she said.
She also highlighted jurisdictional issues. “In Nigeria, for example, the judicial system for the most part does not guarantee the sanctity of contracts, so contracting parties should therefore avoid being subjected to a system that does not ensure the sanctity of contracts by providing a suitable governing law and dispute resolution clause, Iyayi explained.
Ten-point plan to protect the contract
Helpfully, Iyayi concluded her contribution by listing ten key measures that parties can take to protect the contract. These included the following steps: -
- Create a robust contract that protects your business.
- Provide adequate liquidated damages clauses.
- Provide for termination rights e.g. the employer should have the right to terminate the contract and engage a replacement contractor where the contractor is not performing.
- Ensure provisions that allow extension of time due to impact of governmental interference or regulatory challenges on the project.
- Ensure your contact is administered correctly.
- Employ a sophisticated team that is versed in administering a contract.
- Follow the contractual provisions in detail.
- Understand the contract.
- Preserve your legal right and manage the contractual relationship.
- Include dispute management provisions in the contracts.
The next speaker, Dr Ahmed Fathi Waly, managing partner of WALY Arbitration and Contract Administration, offered a regional perspective on the termination of contracts for reason of default, the consequences of this and the parties’ entitlements. He gave an overview of how default was handled according to the legal perspective in the MENA region and also how the FIDIC 2017 contracts dealt with termination for contractor’s default, employer’s default and how the contract stipulated compliance with civil law. He also pointed out how different civil codes affected default and said that parties needed to be aware of these differences.
Closing the conference, FIDIC CEO Dr Nelson Ogunshakin thanked all the speakers and attendees for taking part over what had been a busy, but informative two-day event. He also thanked FIDIC strategic partner, international law firm CMS, for their sponsorship and support of the Official FIDIC Contract Users’ Conference series and also thanked silver sponsors HKA and Fenwick Elliott for their support.
The next Official FIDIC Contract Users’ Conference in the regional series is the Americas time zone event which takes place on 16-17 May 2022 starting at 4pm CEST.
Click here for details of the conference, including registration information.
